The factory cost of goods produced is made up of ____
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Correct Answer: Option A
Explanation:
The Factory Cost of Goods Produced (also known as Manufacturing Cost) is the total cost incurred to produce finished goods in a manufacturing setup. It is made up of two main components:
1. Prime Cost
These are direct costs that are directly traceable to the product:
- Direct materials (raw materials consumed)
- Direct labour
- Direct expenses
2. Factory Overhead
These are indirect manufacturing costs, such as:
- Indirect materials (e.g., lubricants, cleaning supplies)
- Indirect labour (e.g., supervisor wages)
- Depreciation of factory equipment
- Factory rent, electricity, maintenance
So,
\[
\text{Factory Cost of Goods Produced} = \text{Prime Cost} + \text{Factory Overhead}
\]
The Factory Cost of Goods Produced (also known as Manufacturing Cost) is the total cost incurred to produce finished goods in a manufacturing setup. It is made up of two main components:
1. Prime Cost
These are direct costs that are directly traceable to the product:
- Direct materials (raw materials consumed)
- Direct labour
- Direct expenses
2. Factory Overhead
These are indirect manufacturing costs, such as:
- Indirect materials (e.g., lubricants, cleaning supplies)
- Indirect labour (e.g., supervisor wages)
- Depreciation of factory equipment
- Factory rent, electricity, maintenance
So,
\[
\text{Factory Cost of Goods Produced} = \text{Prime Cost} + \text{Factory Overhead}
\]